“Bang for the Buck” and College Ratings

President Obama made headlines in the higher education world last week with a series of speeches about possible federal plans designed to bring down the cost of college. While the President made several interesting points (such as cutting law school from three to two years), the most interesting proposal to me was has plan to create a series of federal ratings based on whether colleges provide “good value” to students—tying funding to those ratings.

How could those ratings be constructed? As noted by Libby Nelson in Politico, the federal government plans to publish currently collected data on the net price of attendance (what students pay after taking grant aid into account), average borrowing amounts, and enrollment of Pell Grant recipients. Other measures could potentially be included, some of which are already collected but not readily available (graduation rates for Pell recipients) and others which would be brand new (let your imagination run wild).

Regular readers of this blog are probably aware of my work with Washington Monthly magazine’s annual set of college rankings. Last year was my first year as the consulting methodologist, meaning that I collected the data underlying the rankings, compiled it, and created the rankings—including a new measure of cost-adjusted graduation rate performance. This measure seeks to reward colleges which do a good job serving and graduating students from modest economic means, a far cry from many prestige-based rankings.

The metrics in the Washington Monthly rankings are at least somewhat similar to those proposed by President Obama in his speeches. As a result, we bumped up the release of the new 2013 “bang for the buck” rankings to Thursday afternoon. These rankings reward colleges which performed well on four different metrics:

  • Have a graduation rate of at least 50%.
  • Match or exceed their predicted graduation rate given student and institutional characteristics.
  • Have at least 20% of students receive Pell Grants (a measure of effort in enrolling low-income students).
  • Have a three-year student loan default rate of less than 10%.

Only one in five four-year colleges in America met all four of those criteria, which highlighted a different group of colleges than is normally highlighted. Colleges such as CUNY Baruch College and Cal State University-Fullerton ranked well, while most Ivy League institutions failed to make the list due to Pell Grant enrollment rates in the teens.

This work caught the eye of the media, as I was asked to be on MSNBC’s “All in with Chris Hayes” on Friday night to discuss the rankings and their policy implications. Here is a link to the full segment, where I’m on with Matt Taibbi of Rolling Stone and well-known author Anna Kamenetz:

http://video.msnbc.msn.com/all-in-/52832257/

This was a fun experience, and now I can put the “As Seen on TV” label on my CV. (Right?) Seriously, though, stay tuned for the full Washington Monthly rankings coming out in the morning!

Financial Aid as a Paycheck?

President Obama is set to make a series of speeches this week addressing college affordability—a hot topic on college campuses as new students move into their dorm rooms. An article in this morning’s New York Times provides some highlights of the plan. While there are other interesting proposals, most notably tying funding to some measure of college success, I’m focusing this brief post on the idea to disburse Pell Grants throughout the semester—“aid like a paycheck.”

The goal of “aid like a paycheck” is to spread grant aid disbursals out through the semester so students take ownership of their education. Sounds great, right? The problem is that it’s only been tested at a small number of community colleges in low-tuition states, such as California. If a student has more financial aid than the cost of attendance, then there is “extra” aid to disburse. But this doesn’t apply to the vast majority of students, particularly those at four-year schools. Spreading out aid awards for students with unmet need creates an even bigger financial gap at the beginning of the semester.

In order for “aid like a paycheck” to work for the vast majority of students, we have to make other costs look like a monthly bill. If students still have to pay for tuition, books, and housing upfront (or face a hefty interest rate), this program will create a yawning financial gap. If colleges want to be accountable to students, perhaps they should bill students per month for their courses—that way, dropped courses hurt the institution’s bottom line more than the student’s. This would delay funds coming in to a college, which can result in a loss of interest given the large amounts of tuition revenue.

Before we try “aid like a paycheck” on a large scale, Mr. President, let’s try making colleges get their funds from students in that same way. And let’s also get some research on how it works for students whose financial need isn’t fully met by the Pell Grant. The feds have the power to try demonstration programs, and this would be worth a shot.

Simplifying the FAFSA–How Far Can We Go?

It is painfully obvious to students, their families, and financial aid administrators alike that the current system of determining federal financial aid eligibility is incredibly complex and time-consuming. Although there should be broad support for changes to the financial aid system, any progress has been halting at best. I have devoted much of my time to researching and discussing potential changes to the financial aid system. Below is some of my work, going from relatively minor to major changes.

I’ve been working on an ongoing study with the National Association of Student Financial Aid Administrators examining the extent to which students’ financial aid packages would change if income data from one year earlier (the “prior-prior year”) than is currently used were to be used in the FAFSA calculations. Although a full report from this study won’t be out until sometime next month, here is a nice summary of the work from the Chronicle of Higher Education. The key point from this work is that, since family resources don’t change that much for students with the greatest financial need, students could file their FAFSA several months earlier using income data from the prior-prior year without a substantial change in aid targeting.

Under a prior-prior year system, students would still have to file the FAFSA each year. Given the fact that many students don’t see that much income volatility, there is a case to be made that students should only have to file the FAFSA once—at the beginning of college—unless their family or financial circumstances change by a considerable margin. In a piece hot off the virtual presses at the Chronicle, Sara Goldrick-Rab and I discuss why it would be better for many students to only have to file the FAFSA once.  I would like to know more about the costs and benefits of such a program (weighing the benefits of reduced complexity and administrative compliance costs versus the likelihood of higher aid spending), but the net fiscal cost is likely to be small or even positive.

So let’s take this one step further. Do we even need to have all students file the FAFSA? Sara and I have looked at the possibility of automatically granting students the maximum Pell Grant if anyone in their family qualifies for means-tested benefits (primarily free and reduced price lunches). We detail the results of our fiscal analysis and simulation in an Institute for Research on Poverty working paper, where we find that such a program is likely to remain reasonably well targeted and pass a cost-benefit test in the long run.

There is a broad menu of options available to simplify the FAFSA, from giving students more time to complete the form to getting rid of it altogether. Let’s talk more about these options (plus many more) and actually get something done that can help all stakeholders in the higher education arena.

Yes, Student Characteristics Matter. But So Do Colleges.

It is no surprise to those in the higher education world that student characteristics and institutional resources are strongly associated with student outcomes. Colleges which attract academically elite students and have the ability to spend large sums of money on instruction and student support should be able to graduate more of their students than open-access, financially-strapped universities, even after holding factors such as teaching quality constant. But an article in today’s Inside Higher Ed shows that there is a great deal of interest in determining the correlation between inputs and outputs (such as graduation).

The article highlights two new studies that examine the relationship between inputs and outputs. The first, by the Department of Education’s Advisory Committee on Student Financial Assistance, breaks down graduation rates by the percentage of students who are Pell Grant recipients, per-student endowments, and ACT/SAT scores using IPEDS data. The second new study, by the president of Colorado Technical University, finds that four student characteristics (race, EFC, transfer credits, and full-time status) explain 74% of the variation in an unidentified for-profit college’s graduation rate. His conclusion is that “public [emphasis original] policy will not increase college graduates by focusing on institution characteristics.”

While these studies take different approaches (one using institutional-level data and the other using student-level data), they highlight the importance that student and institutional characteristics currently have in predicting student success rates. These studies are not novel or unique—they follow a series of papers in HCM Strategists’ Context for Success project in 2012 and even more work before that. I contributed a paper to the project (with Doug Harris at Tulane University) examining input-adjusted graduation rates using IPEDS data. We found R-squared values of approximately 0.74 using a range of student and institutional characteristics, although the predictive power varied by Carnegie classification. It is also worth noting that the ACSFA report calculated predicted graduation rates with an R-squared value of 0.80, but they control for factors (like expenditures and endowment) that are at least somewhat within an institution’s control and don’t allow for a look at cost-effectiveness.

This suggests the importance of taking a value-added approach in performance measurement. Just like K-12 education is moving beyond rewarding schools for meeting raw benchmarks and adopting a gain score approach, higher education needs to do the same. Higher education also needs to look at cost-adjusted models to examine cost-effectiveness, something which we do in the HCM paper and I have done in the Washington Monthly college rankings (a new set of which will be out later this month).

However, even if a regression model explains 74% of the variation in graduation rates, a substantial amount can be attributed either to omitted variables (such as motivation) or institutional actions. The article by the Colorado Technical University president takes exactly the wrong approach, saying that “student graduation may have little to do with institutional factors.” If his statement is accurate, we would expect colleges’ predicted graduation rates to be equal to their actual graduation rates. But, as anyone who was spent time on college campuses should know, institutional practices and policies can play an important role in retention and graduation. The 2012 Washington Monthly rankings included a predicted vs. actual graduation rate component. While Colorado Tech basically hit its predicted graduation rate of 25% (with an actual graduation rate one percentage point higher), other colleges outperformed their prediction given student and institutional characteristics. For example, San Diego State University and Rutgers University-Newark, among others, outperformed their prediction by more than ten percentage points.

While incoming student characteristics do affect graduation rates (and I’m baffled by the amount of attention on this known fact), colleges’ actions do matter. Let’s highlight the colleges which appear to be doing a good job with their inputs (and at a reasonable price to students and taxpayers) and see what we can learn from them.